Cost Accounting and Control

Acctg.
102
Assumption College of Nabunturan
SY 2019- 2020
Felinita R. Barroga, CPA, DBA
Cost Accounting

 It is the field of accounting that measures, records,
and reports information about costs.
 Is the art or process of recording, analyzing and

classifying of `expenditure for the purpose of
product costing or service costing, ascertainment of
profitability, operational planning and cost control.
Cost Accounting

 is a forward looking approach which is related to the
recording, analyzing and classifying of expenditure
with the object of ascertaining the total and per unit
cost of a product or service.
 It is an internal aspect of the organization which
measures the operational efficiency of an enterprise
and assists the management to maintain costs at the
lowest point consistent with the efficient operating
conditions.
Cost Accounting
recording, and
 “Costing is the classifying,
appropriate allocation of expenditure for the
determination of the cost of products or services; and
for the presentation of suitably arranged data for
purposes of control and guidance of the
management.
 It includes the ascertainment of the cost of every

order, job, contract, process, service or unit as may be
appropriate. It deals with the cost of production,
selling, distribution.”
Uses of Cost Accounting Data

 Determining Product Costs
 Determining selling price of a product
 Meeting competition
 Bidding on contracts
 Analyzing profitability
Planning and Control

Dynamic Techniques of Cost Accounting

 Standard costing
 Budgetary control and
 Marginal costing
Management Accounting

 Management Accounting is the presentation of
accounting information in such a way as to assist
management in the creation of policy and the day to
day operation of an undertaking.
 It relates to the use of financial and cost data for the
purpose of evaluating the performance of the
business.
Limitations of Financial Accounting



No provision for material control
Non- availability of detailed particulars about labor costs
 Classification of Accounts is in a general manner
 No classification of costs into direct and indirect costs
 Ascertainment of true cost of production not possible.
 No record of wastage
 No provision for a system of standards
 No assistance in fixation of selling price and calculation of
tender price
 No assistance in cost control
 No provision for comparison of costs
 No assistance in Planning and Decision-making
Features of Cost Accounting
1) It is a special branch of accountancy dealing with the
ascertainment of cost of products and services
2) Cost accountancy is both a science and an art.
3) It follows the same double entry system.
4) It involves classification, analysis, recording and ascertainment
of costs.
5) It determines the total and per unit cost of products and
services.
6) It provides data for fixing the selling price of products and
services and for determining the quotation price or tender price.
7) It provides data to the management for exercising effective
control over costs.
8) Helpful in forward planning and decision making process.
Scope of Cost Accounting

1.Costing refers to the techniques and processes
of ascertaining costs. It involves classification,
analysis and appropriate allocation of
expenditure incurred in respect of a product or
service.
Thus costing consists of the principles, rules and

methods which are used for determining the
costs of products or services.
2.Cost Accounting:

Cost accounting is the science which records and
determines scientifically the accurate cost of
manufacture or service per unit. It controls and guides
the persons involved in the organization of production.
Thus, cost accounting is the formal mechanism by

which cost data are provided for ascertaining and
controlling the costs of products or services

3

) Cost Control: Cost control is the guidance and
regulation, by executive action, of the costs of
operating an undertaking.
Cost control involves the setting up of targets for

expenses and production performance,
measurement of actuals, comparison of actuals
with targets to ascertain variances, analysis of
variances and taking corrective action to
eliminate variances.

4) Budgetary control:
It is a system whereby the budgets are used
as a means of planning and controlling costs.
Budgetary control involves the establishment

of budgets for each section of the organization,
measurement of the actual performances and
their comparison with budgeted performance to
determine the deviations, the ascertainment of
reasons for such deviations and taking suitable
action to remedy the defects.

5) Cost Audit:
It is the verification of the correctness of cost
accounts and a check on the adherence to
the cost accounting plan.
The purpose of the cost audit is to ensure

that the figures as shown by cost accounts
are correct and that cost accounts, cost
centers and cost units have been properly
charged
Objectives of Cost Accounting

The primary objective of cost accounting is to
find out the cost of unit production of a
commodity or service.
According to J.R. Batliboi “ The main objective

of cost accounts, irrespective of the branch of
industry to which they are applied should
always be to express faithfully and accurately
the true costs”.
Objectives of Cost Accounting
1. To study, analyze and classify the cost of production.
2. To ascertain the total and per unit cost of the commodity
produced, work performed and service rendered.
3. To ascertain the profitability of different products, jobs or
work orders.
4. To provide means to measure the efficiency of labor.
5. To exercise effective control over wastage and loss of
materials during production.
6. To exercise effective control on the idle time of workers
and machines.
7. To provide statistical data for the purpose of submitting
quotations and tenders
8. To provide for cost control through budgetary control
and standard costing system.
Methods of Costing

1.Job Costing is applied to special order type of industry which
is devoted to the execution of specific orders such as printing press,
ship building, road construction etc. The main objective of job
costing is to ascertain the cost and profit or loss in respect of each
job, contract or project undertaken.
2. Process Costing is applied to mass production type of

industry engaged in the continuous production of uniform
standard products such as chemicals, oil, cement, cloth, yarn,
mining etc.The main objective of process costing is to ascertain the
cost of process or operation involved in converting raw materials in
to finished products.
Major Differences Between Process
Costing & Job Order Costing
Process Costing  Job Order Costing
 Homogeneous units pass  Unique jobs are worked on
through a series of similar during a time period.
processes.
 Costs are accumulated by
 Costs are accumulated by
processing department. individual job.
 Unit costs are computed by  Unit costs are determined by
dividing the individual dividing the total costs on the
processing departments’ costs job cost sheet by the number of
by the equivalent production. units on the job.
 The cost of production report
provides the detail for the  The job cost sheet provides the
Work In Process account for detail for the Work in Process
each processing department. account.

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What are the main differences between process costing and job order costing?

What are the objectives of cost accounting?

Acctg.

 Is the art or process of recording, analyzing and

 It includes the ascertainment of the cost of every

Planning and Control

 Budgetary control and

Thus costing consists of the principles, rules and

Thus, cost accounting is the formal mechanism by

Cost control involves the setting up of targets for

Budgetary control involves the establishment

The purpose of the cost audit is to ensure

According to J.R. Batliboi “ The main objective

2. Process Costing is applied to mass production type of

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